In a move that could shake up the entertainment industry, Amazon.com (US:AMZN) is reportedly exploring the possibility of acquiring movie theater chain AMC Entertainment (US:AMC), according to senior sources familiar with the matter.
Shares of AMC surged as much as 21% on Tuesday and closed 13% higher, on the speculative article reported by The Intersect. The stock has been a headline grabber since the onset of the pandemic, but mostly for its allure to the meme-chasing Reddit r/WallStreetBets crowd. This is different.
The online retail giant, which closed an $8.5 billion deal for MGM last year, reportedly dispatched investment advisers and entertainment chiefs to explore acquisition plans for AMC.
The move is aimed at using AMC’s 600 theaters as “marketing weigh stations” to promote Amazon Prime movies, for cross-selling opportunities and to serve as local distribution hubs. More importantly, Amazon would be able to collect data from the 200 million movie goers who sit in AMC’s seats.
Wedbush Securities analyst Alicia Reese slammed the rumors, telling investors the deal would unlikely be completed given AMC’s $4.6 billion of debt and premium valuation.
Reece cited the more recent bankruptcy of Europe’s Cineworld as a possibility for the e-commerce juggernaut to buy movie theaters at pennies on the dollar.
Wedbush maintained its underperform call on the stock and bearish $2 target price following the news.
The potential acquisition of AMC by Amazon could mark a significant shift in the entertainment industry, but whether it will come to pass remains to be seen.
Both AMC Entertainment and Amazon have yet to comment on the speculation.
Fintel’s options data on AMC highlighted a spike in net long premium bought by investors on Tuesday.
Some $710,000 of net premium was purchased which compares to $179,000 in the previous day and a week of net premium sold every day in the week prior.
The table below provides a summary of recent options trades in the stock.
AMC shares prior to the release were trading at annual lows, following shareholder approval to convert preferred APE units into ordinary stock. That March 14 vote sent AMC stock down more than 20%. The approved reverse stock split will see AMC issue 10 shares for each 1 share held by investors and will allow the company to convert the APE units that were issued within the last year.
This story originally appeared on Fintel.
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